Employee Benefit Plan Audit Opportunities

By Sheldon M. Geller

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OCTOBER 2006 - There are significant opportunities for middle-market CPA firms to build employee benefit plan audit practices. National firms have been preoccupied with engagements related to compliance with the Sarbanes-Oxley Act (SOX), while larger firms have been avoiding lower-margin pension plan audit engagements or, by quoting these engagements at considerable fees, driving the business to middle-market firms.

The U.S. Department of Labor (DOL) requires all employers with more than 100 eligible employee-benefit-plan participants, as well as certain smaller employers, to conduct employee benefit plan audits. More than 75,000 employee benefit plan audits are conducted each plan year, with the number continuing to grow. A well-developed pension plan audit practice may convert a traditionally ancillary service into a significant practice area. Furthermore, CPAs may build relationships with plan sponsors and their boards of directors and trustees.

CPA firms may distinguish themselves by emphasizing pension auditing and having certain partners, managers, and staff concentrate on auditing employee benefit plans. These audits are specialized engagements requiring particular knowledge of the Employee Retirement Income Security Act (ERISA) and the development of specific audit manuals.

Independence. SOX requires plan sponsors to choose an auditor other than their corporate auditor to audit their employee benefit plan. Thus, CPA firms may audit an employee benefit plan even if they do not audit the plan sponsor’s financial statements. Employee benefit plans for large and small public and private companies and not-for-profit entities include defined benefit plans, defined contribution plans, 401(k) plans, employee stock ownership plans, and health and welfare plans.

Fines and Sanctions

DOL regulations permit a plan sponsor to be fined if it retains a CPA firm without sufficient knowledge to properly perform the plan audit. The DOL can also report CPA firms to the relevant state board of accountancy and the AICPA’s Professional Ethics Division. An ethics investigation can result in disciplinary actions against the responsible parties, including sanctions and the loss of professional licensure.

The AICPA Employee Benefit Plan Audit Quality Center offers resources to enhance a firm’s audit performance. The center offers employee benefit plan best practices and advises on recent employee benefit plan audit developments. This practice area represents a niche for firms that can retain employee benefit professionals, providing a firm with engagements outside of the tax season.

Sheldon M. Geller, Esq., is managing director of the Geller Group LLC, a member of Focus Financial Partners.





















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